🏦 You don't need a yacht anymore

Wednesday, February 17, 2021 by Robinhood Snacks | Disclosures

Microsoft trying to spend $50B

Dow Jones
31,523 (+0.20%)
S&P 500
3,933 (-0.06%)
Nasdaq
14,047 (-0.34%)
Bitcoin
$48,592 (-1.27%)

Hey Snackers,

An eventful life, in a nutshell: Planters mascot Mr. Peanut died during the 2020 Super Bowl. Then, he was reborn as "Baby Nut" (more like Benjamin Nutton). Soon after, Baby Nut turned into bar-going Peanut Jr. Now, he's being sold to the company that makes SPAM.

Stocks barely budged after the long weekend (same). Meanwhile, Bitcoin topped $50K for the first time yesterday, partly thanks to backing from companies like Mastercard and Tesla.

Yachty
1. Goldman Sachs launches wealth management for retail investors

So relatable... You don't need $20M and a yacht registered in the Maldives to invest with Goldman Sachs anymore. The OG Wall Street firm just unveiled "Marcus Invest," a robo-advisory platform that can get you started with $1K. For a small fee, customers can get their money robo-managed according to Goldman's investment strategies. The $$$ is allocated across stock and bond ETFs.

  • It's all part of Goldman's push into mainstream banking, which is seen as more stable/reliable than its riskier Wall Street trading biz (though the upside potential is lower).
  • In 2020: Goldman made $1.2B in consumer-banking revenue, up 40% from 2019. But it's still a tiny fraction of Goldman's $44.6B total 2020 revenue.

Trading the AP for a Timex... Goldman has slowly been expanding its digital consumer banking suite "Marcus," which launched in 2016 with savings accounts and loans. Last year, it shipped an app and added financial insights. It also plans to launch checking accounts. Marcus Invest is the next step toward Goldman's goal of becoming the only banking app on your phone. But the competition is steep.

  • Thirteen years late: Goldman is lagging behind Wealthfront and Betterment, which pioneered robo-advisory services in 2008.
  • Dozens deep: Most big US banks and brokerages offer some type of automated-investing. And unlike delivery apps which can be easily switched, brokerage accounts tend to be "stickier."
THE TAKEAWAY

The retail investor is too big to ignore... and big banks want in before it's too late. In 1975, the average fee to place a stock trade was $49 — and investment banks wouldn't pay much attention to you unless your net worth ended in "ion." The rise of commission-free trading apps, pioneered by Robinhood (which owns Snacks), spurred major brokerages like Vanguard and Schwab to cut fees. The rest is history: during the first half of 2020, individual investors accounted for 19.5% of all trades, nearly double from 2010. Now everyone from JPMorgan Chase to Citi has raced to offer retail investing — and Goldman is the latest.

Splurge

Finding inspo in a Word Doc... feels almost as hard as Microsoft's failed acquisition attempts. Last year, Microsoft was trying to buy TikTok’s US operations for a whopping ~$50B. Not only did it lose the bid, but the entire sale got scrapped indefinitely. Last week, we learned that Microsoft reportedly tried to buy Pinterest, which is valued at ~$51B. It would’ve been Microsoft's biggest acquisition ever. But it got shut down there too, according to the FT.

These moves seem as random as Bing... which, BTW, Microsoft also owns. Besides Xbox and LinkedIn, which it bought in 2016 for $26.2B, Microsoft hasn't really ventured into the consumery social world. So why does it seem interested in social splurges?

  • Ads: The digital ad market is growing fast: Facebook, Snap, and Google all reported blowout earnings last quarter. Microsoft wants a slice of the pie to better compete with Google and Amazon (Bing search ads aren't cutting it).
  • Cloud(s): By acquiring hundreds of millions of users from TikTok or Pinterest, Microsoft would gain a massive base for its Azure cloud platform. FYI: LinkedIn is currently one of Azure's top 10 cloud customers. But...
THE TAKEAWAY

Shopping might be the main reason... why Microsoft has eyed social apps. In 2019, Microsoft launched a cloud commerce solution to help customers create online shopping experiences. It also bought ecommerce advertising startup PromoteIQ. By buying a company like TikTok, which has started experimenting with in-app shopping, Microsoft could make sure that sales happen through its own cloud solutions. It's a triple whammy of cloud growth, ad sales, and valuable customer data that positions it against Rival #1: Amazon. Etsy could be a good next target. At $28B, it would be a relative steal for Microsoft.

What else we’re Snackin’
  • Vax: The Biden admin will ship out 13.5M Covid vaccine doses per week, up from 11M last week.
  • Rocket: Elon Musk’s SpaceX reportedly raised $850M, launching its valuation to $74B.
  • Dark: Brutal snowstorms have led to rolling blackouts in Texas, leaving millions without power and heat.
  • RIP: Marriott CEO Arne Sorenson, who created the world’s largest hotel operator, died at age 62 after battling pancreatic cancer.
  • Pharm: CVS beat earnings expectations thanks to higher prescription volume and Covid testing/vaccine foot traffic.
  • Buffy: Chevron and Verizon shares ticked up after Warren Buffett's Berkshire Hathaway revealed it has taken big stakes in the companies.
Snacks Daily Podcast

After Universal Music IPOs, all three major record labels will be publicly traded.

Their biggest growth opportunity: the TikTok skateboarder dude drinking cranberry juice to Fleetwood Mac.

Being the digital soundtrack for the app economy is the music industry's secret profit puppy.

Wednesday

Authors of this Snacks own shares of: Microsoft

ID: 1527819